Globaltraded.com — Saudi Arabia’s economy is likely to grow by 4.4 percent in 2024, Aljazira Capital has predicted in its year-end report. The forecast is in line with the Kingdom’s Finance Ministry’s projection for the current year, whereas Moody’s predicted a 4.6 percent increase in 2024.
Saudi Arabia, officially known as the Kingdom of Saudi Arabia (KSA), stands as the unrivaled economic giant in the Arab world, contributing a staggering 25% to the Arab Gross Domestic Product (GDP). Renowned for its oil-based economy, the Kingdom exerts strong government controls over key economic activities and boasts ownership of approximately 25% of the world’s oil reserves. Additionally, Saudi Arabia plays a pivotal role within the Organisation of the Petroleum Exporting Countries (OPEC), influencing global oil dynamics.
The economy of Saudi Arabia is the largest in the Middle East and the eighteenth-largest in the world. The Saudi economy is highly reliant on its petroleum sector. Oil accounts on average in recent years for approximately 40% of Saudi GDP and 75% of fiscal revenue, with substantial fluctuations depending on oil prices each year.
The kingdom has the second-largest proven petroleum reserves, and the fourth-largest measured natural gas reserves. Saudi Arabia is currently the largest exporter of petroleum in the world. Other major parts of the economy include refining and chemical manufacturing from the oil reserves, much of which is vertically integrated in the state-owned enterprise, Saudi Aramco. Saudi Arabia is permanent and founding member of OPEC.
Situated as the largest free economic market in the Middle East and North Africa (MENA) region, Saudi Arabia holds a prominent position as a key member of the Gulf Cooperation Council (GCC). The Kingdom has successfully forged free trade agreements with various entities, including the Greater Arab Free Trade Area (GAFTA), the European Free Trade Association (EFTA), and Singapore, fostering a dynamic and interconnected economic landscape.
Notably, Saudi Arabia commands both the largest economy and population in the Gulf region. With half of its population under 25 years old, the nation experiences one of the fastest population growth rates globally. The current population, exceeding 28 million, is anticipated to reach 29 million by the end of 2020, necessitating substantial investments to cater to the burgeoning needs of this expanding demographic.
Positioning itself as a high-growth market, Saudi Arabia presents substantial opportunities across diverse sectors. In 2016, the government introduced ‘Saudi Vision 2030,’ a comprehensive transformation plan encompassing social, cultural, and economic dimensions. This visionary plan seeks to steer the Kingdom away from fossil fuels, outlining specific policies and objectives to be achieved by 2030.
Saudi Vision 2030 guides the country’s business and economic decisions, emphasizing deregulation and privatization across various sectors such as health, education, infrastructure, recreation, and tourism. The successful initial public offering (IPO) of 1.5% of the national oil giant, Saudi Aramco, generated a staggering $25.6 billion in December, earmarked for advancing the Vision 2030 plan and future privatization initiatives.
The Kingdom’s efforts to attract foreign investment have been notably successful, drawing thousands of international businesses and investors seeking to establish a foothold. The Saudi Commission for Tourism and National Heritage (SCTH) took a historic step in September 2019 by issuing tourist visas, encouraging global visitors to explore the Kingdom’s rich culture and heritage.
Further, KSA has been progressively easing its business regulations, permitting 100% ownership in select Saudi companies, facilitating real estate acquisitions by foreign nationals, and relaxing social norms, such as abolishing the requirement for foreign female visitors to wear an ‘abaya.’
In response to the evolving economic landscape and the challenges posed by the COVID-19 pandemic, Saudi Arabia made a strategic decision to increase the Value Added Tax (VAT) rate from 5% to 15% effective July 1, 2020, aiming to enhance fiscal balance.
As Saudi Arabia continues to present unprecedented business opportunities, individuals, small and medium-sized enterprises (SMEs), and corporations of all sizes, supported by entities like Sovereign and strategic collaboration partners, are well-positioned to harness substantial opportunities by establishing a legal presence in this economic powerhouse. The Kingdom’s journey towards diversification and modernization is reshaping its global standing and beckoning businesses to be part of its transformative growth story. (GT)
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